A general rule of thumb in new apartment developments is that the penthouses get the rooftop.

It's a formula that's become commonplace across Australia's apartment market. Residents might have access to a pool, gym or barbecue facilities on a dedicated lower level, but the most desirable outdoor spaces are typically reserved for the highest-priced homes at the top of the building.

Sherpa Group has taken the opposite approach.

Rather than dedicating the rooftop to a handful of buyers, the Gold Coast developer has made it the centrepiece of its Flourish collection, creating expansive shared spaces from the best vantage point in the building.

The philosophy has reached its most ambitious expression at Flourish Soleira in Palm Beach, where two rooftop precincts connected by a skybridge will deliver one of the most extensive lifestyle offerings seen in a residential apartment project on the Gold Coast.

[smartcode_project:default project_id=150017 project_image_fid=374053]

"We're seeing a clear move toward developments that offer more than just an apartment," Sherpa Group founder Christie Leet said.

"People want spaces that support how they actually live, whether that's working from home, staying active, or spending time with family and friends.

"That's where amenity becomes critical. It's not just about what's included, but how those spaces are designed to be used every day."

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The breadth of amenity has already attracted buyers across multiple demographics. Younger first home buyers have been drawn to Soleira's one-bedroom apartments, a product rarely delivered in Palm Beach, while families have responded to practical inclusions such as the shallow children's pool adjoining the main lap pool and the extensive communal recreation areas.

Instead of a single rooftop, Soleira delivers two distinct lifestyle zones.

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The southern rooftop has been dedicated to wellness, featuring a gym, yoga and Pilates studio, work-from-home facilities, a wellness centre, spa, and hot and cold plunge pools.

The northern rooftop focuses on recreation and entertaining, incorporating a heated resort-style pool, private dining rooms, pizza ovens, barbecues, a golf simulator, children's recreation areas, and what is expected to be the Gold Coast's first rooftop basketball court, which will also double as a squash court.

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Beyond the rooftops, Soleira will introduce 1,500 sqm of curated retail beneath the towers, creating one of Palm Beach's first genuinely mixed-use lifestyle precincts where cafés, restaurants and convenience retail become part of residents' everyday lives.

Sherpa has also retained management rights across the development, allowing it to oversee the long-term operation of the building through a 24-hour concierge model. The developer is also exploring additional revenue streams within the precinct aimed at helping offset ongoing body corporate costs for residents.

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While Soleira is the largest project Sherpa has delivered, the rooftop-first philosophy has been evolving for several years.

It began with Flourish Amargo, the first project released under the Flourish brand. Rather than competing at the ultra-luxury end of the market with oversized half-floor and full-floor residences, Sherpa focused on creating lifestyle-driven apartments supported by resort-style shared spaces.

Amargo introduced more than 800 sqm of rooftop amenity, combining wellness facilities, heated pools, entertaining areas, cabanas, pizza ovens and private dining spaces into what was designed as an extension of residents' homes rather than a facility used only occasionally.

[smartcode_project:default project_id=146527 project_image_fid=366550]

That approach continued with Flourish Oasis, where the same amenity-led philosophy was refined into a more boutique development. Strong demand from Sherpa's growing VIP database saw much of the project sold before it reached the broader market, reinforcing buyer appetite for apartment communities centred around shared lifestyle experiences.

Flourish Amargo is slated for completion mid-way-through next year, with Oasis to be delivered by late 2027. Flourish Soleira is expected to complete in 2030.

[smartcode_project_cta:default project_id=150017]

Joel Robinson

Sherpa takes amenity to the sky as Flourish Soleira captures booming Palm Beach demand

As apartment living continues to evolve across Sydney's growth corridors, the quality and distribution of shared spaces is increasingly shaping how residents experience home. Rather than functioning as add-ons, amenities are being embedded into the daily rhythm of a building, supporting everything from quiet retreat to social interaction, often within a single vertical community.

At <a href="https://www.apartments.com.au/new-apartments/aeris-melrose-park-nursery-street-melrose-park-nsw-2114">Aeris</a> in Melrose Park, this approach is resolved through a layered amenity offering that unfolds from ground level through to its upper podium. Developed by <a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> in partnership with Hankyu Hanshin Properties, the project introduces 468 apartments across two towers and a mid-rise building, positioned at the highest point of the broader masterplan.

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The amenity experience begins at street level, where two courtyards sit within a landscaped setting that connects residents to the wider network of parks and green spaces. These green spaces are not isolated pockets but part of a wider pedestrian network that links Aeris to the surrounding <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a> precinct, including Central Park, future schools, and the Town Centre opening in July 2026. The result is a transition that moves from public to private without abrupt boundaries, allowing residents to pass through shaded, tree-lined environments before reaching the building itself.

Moving upward, the focus shifts to the level five podium, where the primary communal facilities are concentrated. This space brings together a 16-metre swimming pool, outdoor seating areas, and a communal BBQ zone arranged to take advantage of elevated outlooks. Seating is positioned beneath pergolas, creating pockets of shade that extend the usability of the space throughout the day. The pool edge aligns with views toward the wider district, reinforcing the sense of elevation that defines the project’s positioning.

In the adjacent building, this is complemented by quieter, more contemplative spaces, including an outdoor cinema set within the same level. Positioned to operate primarily in the evening, it introduces a different tempo to the shared environment, shifting from daytime activity to after-hours use without requiring separate zones.

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The podium also accommodates an intimate private resident gym. Located on the lower levels, it gives residents convenient access to fitness facilities without leaving the building.

Above, the elevated podium sky deck extends the amenity offering, providing additional open-air spaces with elevated outlooks across the surrounding landscape. While more restrained in program, this upper level reinforces the project’s vertical progression, from ground-level greenery to elevated outlook, allowing residents to move between distinct spatial conditions within a single address.

This distribution of amenities reflects a deliberate response to how residents use space across the day. Sekisui House Australia Sales and Marketing Director Peter Kalaf points to the role these shared areas play in shaping buyer demand. Aeris has been conceived as more than a collection of apartments, with the podium pool, gym and outdoor cinema forming part of a broader lifestyle offering that extends the home beyond each individual residence.

[smartcode_project:default project_id=426 project_image_fid=360300]

What distinguishes Aeris is not the inclusion of these elements individually, but how they are arranged in relation to one another. Active, social, and passive spaces are layered vertically rather than separated, allowing residents to choose between them without leaving the building or moving far from their apartment. This proximity supports both routine use, such as a morning swim or evening workout, and more occasional gatherings, whether around the BBQ area or within the cinema setting.

The amenity design also sits within a broader framework of connectivity across Melrose Park. The Melrose Park Town Centre, anchored by Coles and Dan Murphys, features a mix of retail, dining, health and lifestyle offerings, bringing everyday convenience closer to residents. By the end of the year, more than five hectares of parks and open space, equivalent to around seven football fields of green space on residents' doorstep, will further enhance the precinct, allowing the internal facilities at Aeris to operate as an extension of the wider neighbourhood rather than a substitute for it.

Construction at Aeris continues to gather momentum, with ground floor slabs expected to be completed in late 2026 before the first sections of the buildings begin to rise above ground.

[smartcode_project_cta:default project_id=426]

Elevated amenity anchors daily life at Aeris, Melrose Park

Repeat buyers are one of the strongest measures of confidence in any apartment development.

At <a href="https://www.apartments.com.au/new-apartments/era-newcastle-west-124-126-bull-street-newcastle-west-nsw-2302">ERA</a> in Newcastle West, some purchasers are returning to <a href="https://www.apartments.com.au/developers/gwh">GWH</a> after living at the developer's One Apartments. Their decision to purchase again was driven by the quality of life they found after moving into their first GWH home.

Keith Wilton had spent years living in a house in East Maitland before deciding it was time for a change. Apartment living had always been on his radar, but he was selective about what he wanted.

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"I had some boxes I wanted to tick," he says.

Keith points to the open-plan design, generous outdoor areas and considered inclusions as key reasons One Apartments worked for him.

“One of those things was a nice indoor open plan area, but also I wanted a nice outdoor open area that I could entertain on in summer or Christmases or birthdays,” he says.

He also found value in the smaller details, from integrated appliances to shared resident spaces including the pool, cinema and rooftop areas.

[smartcode_project:default project_id=135096 project_image_fid=356818]

After comparing several developments, he chose One Apartments because of GWH's longstanding local reputation and his own experience working with the developer on a commercial project more than a decade earlier.

"I knew that they were local, that the quality of the build was going to be up there. I'd looked at other apartment complexes around and close by, and I just knew that here was a better decision location wise."

Today, Keith says the move has completely changed how he experiences Newcastle.

"I enjoy living in this location because it's more of a lifestyle change. That Newcastle city living where you can walk to restaurants and bars and even beaches and parks and even shopping across the road."

[smartcode_project:default project_id=135096 project_image_fid=356828]

Beyond the location, he says it's the sense of community that has surprised him most.

"Everyone loves living here because they chose to live here, but everyone looks out for each other. It's a real great community feel here."

For Aimee and Lyle Goodman, the journey started almost by chance.

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The couple happened to be having coffee in Newcastle when they noticed the site where One Apartments was about to begin construction.

"We were aware GWH was planning a development," Aimee says. "We made one phone call and things moved pretty quickly after that."

As busy business owners, they initially thought apartment living would simply reduce the maintenance that came with larger homes. Instead, it fundamentally changed how they spent time together.

"We actually catch up more as a family now," Aimee says.

"We've had homes with big yards and lots of space, but everyone ended up in different rooms. Here we'll have dinner together, the kids can play, and we spend far more quality time together."

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Lyle says their confidence came from GWH's reputation within Newcastle's building industry.

"I know people who've worked across different apartment projects, and whenever GWH came up the feedback was always the same. They're rock solid. They're quality."

That confidence only grew throughout the buying process.

"One of the things that really impressed us with GWH was the whole process, was the communication," Lyle says. "It was consistent, it was regular, there was no problem if we had some weird questions, there was no problems in getting answers."

[smartcode_project:default project_id=135096 project_image_fid=351104]

Aimee says one moment stood out.

"The project actually finished on time. We realised we needed to hurry up and sell our house because everything was happening exactly when they said it would."

The positive experience at One Apartments ultimately gave all three buyers the confidence to purchase again with GWH, this time at ERA.

Their confidence reflects what many buyers are seeking in today's apartment market. Location remains important, but so too does certainty around delivery, quality and long-term liveability.

[smartcode_project:default project_id=135096 project_image_fid=356822]

ERA builds on those foundations with 280 one, two and three-bedroom apartments across two landmark towers in <a href="https://www.apartments.com.au/developments/newcastle-west-nsw-2302">Newcastle West</a>.&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/fk-australia">Fender Katsalidis</a>, the project will include more than 2,000 square metres of resident amenities, including a resort-style pool, gym, sauna, private cinema and rooftop entertaining spaces overlooking the harbour and coastline.&nbsp;

The development is also within walking distance of the Newcastle Interchange, Honeysuckle, Darby Street, the harbour foreshore, restaurants, retail and the city’s beaches, continuing the walkable lifestyle that existing GWH buyers say has transformed how they live.

[smartcode_project:default project_id=135096 project_image_fid=356826]

For Keith, the appeal remains straightforward.

"You feel at home even before you've moved into your home."

For Aimee, the change is measured in time.

“I just felt like I had more time,” she says.

[smartcode_project:default project_id=135096 project_image_fid=351102]

Construction at ERA is now underway, with more than half of the residences already sold and limited two and three-bedroom apartments remaining in the East Tower release. Priced from $980,000 for two-bedroom residences and $1.46 million for three-bedroom residences, buyers can secure an apartment with a 10 per cent deposit, with premium homes offering ocean views from Level 8 and harbour views from Level 10.

ERA is also backed by Resilience Insurance's 10-year Latent Defects Insurance policy, providing protection against structural or waterproofing defects for 10 years after completion. The project is anticipated to be completed in early 2028.

[smartcode_project_cta:default project_id=135096]

From ONE to ERA: Why buyers are choosing GWH again in Newcastle West

Virgate Property Group is preparing to commence construction of Verdé, its new apartment development in Melbourne's Arts Precinct at Southbank, following a strong run of sales that has seen more than half of the project's 173 apartments secured.

Verdé has attracted a broad mix of first home buyers, owner-occupiers upgrading from nearby inner-city suburbs and investors, with younger owner-occupier couples aged between 28 and 45 accounting for the strongest enquiry. Many are already living in Southbank, South Melbourne, Albert Park, Port Melbourne, South Yarra and the CBD.

"Verdé is located in one of the most desirable pockets of southern Melbourne," Blair Property Group Director Darren Blair, who is managing sales at Verdé, said.

"It's within walking distance of the Arts Centre, Royal Botanic Gardens, Albert Park Lake, and Southbank's restaurants and retail. It's a great lifestyle location with strong amenity and liveability, which made it a very attractive choice for the project."

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Virgate was already familiar with the precinct, having previously delivered the successful Domain House development in neighbouring South Melbourne. That experience gave the developer confidence to acquire the Coventry Street site and continue expanding its presence in Melbourne's inner south.

"We had been keeping an eye on the site and the broader precinct for a few months before deciding to move forward with the acquisition," Virgate said.

The project was ultimately secured in 2020 following feasibility studies, planning assessments and due diligence, with the brief centred on delivering "a high-quality, considered design that feels both refined and fit for purpose."

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Designed by <a href="https://www.apartments.com.au/architects/bruce-henderson-architects">Bruce Henderson Architects</a>, Verdé comprises 173 one, two and three-bedroom apartments priced from $599,000. The architecture is distinguished by a faceted glass façade that responds to both the site's outlook and Melbourne's changing light conditions.

According to Bruce Henderson Architects, the coloured glazing gives the building a distinctive identity while also providing privacy and solar shading, with residences oriented to capture views across the bay, city skyline and surrounding parklands.

Inside, <a href="https://www.apartments.com.au/interior-designers/designoffice">DesignOffice</a> has created interiors focused on natural light, efficient planning and enduring materials. Apartments feature engineered oak flooring, natural stone benchtops, floor-to-ceiling glazing and SMEG appliances, while a restrained material palette aims to complement the expansive outlooks rather than compete with them.

[smartcode_project:default project_id=4661 project_image_fid=372550]

Resident amenity has also been designed around everyday functionality rather than occasional use. Facilities include a concierge-serviced lobby, residents' lounge with fireplace, library and co-working space, gym, terrace garden with barbecue facilities, ground-floor café, and package delivery management.

The project's location continues to be one of its strongest drawcards. Positioned on Coventry Street, Verdé sits within walking distance of the National Gallery of Victoria, Arts Centre Melbourne, Royal Botanic Gardens and Albert Park Lake, while Southbank's dining precinct, Sturt Street trams and the new ANZAC Station are all nearby. The surrounding education catchment also includes Melbourne Grammar, Melbourne Girls Grammar, Mac.Robertson Girls' High School and several major university campuses.

The sales team says buyers have responded particularly well to the combination of location, design quality and long-term liveability.

"They're responding really positively to the quality of the design, premium resident amenities and the uninterrupted views. Many also appreciate the location and how connected it is to everything they need."

The ability to secure stamp duty savings before completion has also been a key factor for purchasers, alongside the opportunity to personalise finishes ahead of settlement.

With construction set to commence soon and more than half the apartments already sold, Verdé enters its next phase as one of the Arts Precinct's more established apartment developments, offering remaining buyers an opportunity to secure a residence before construction advances further. Expected completion is scheduled for late 2027.

[smartcode_project_cta:default project_id=4661]

Virgate's Verdé Southbank moves toward construction as sales fly past halfway stage

Downsizer-focused apartment development Kooyongkoot in Hawthorn has been recognised at the 2026 Better Future Melbourne Design Awards, taking home Gold and Silver awards in two categories.

<a href="https://www.apartments.com.au/new-apartments/kooyongkoot-hawthorn-1-kooyongkoot-road-hawthorn-vic-3122">Kooyongkoot</a>, currently being delivered by developer PQD and designed by Cera Stribley, received Gold in the Interior Design – Proposed category and Silver in the Architecture – Proposed category.

The dual recognition reflects the design approach behind the boutique development on prestigious Kooyongkoot Road, where the focus has been on creating homes for downsizers seeking the space, quality and functionality of a detached house within a low-rise apartment building.

Rather than maximising apartment numbers, <a href="https://www.apartments.com.au/developers/pqd">PQD</a> and <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a> limited the development to just 18 residences, allowing for larger floorplans, greater privacy, generous landscaping and expansive communal spaces.&nbsp;The majority of the apartments also benefit from corner aspects, allowing for dual sources of natural light.

Now around 70 per cent complete and on track for completion in November 2026, Kooyongkoot will comprise a mix of garden residences, ter​race apartments, sub-penthouses, and is crowned by two half-floor penthouses with direct lift access and private rooftop terraces.

[smartcode_project:default project_id=102717 project_image_fid=355297]

The Silver Award for Architecture recognised the way the building responds to its prominent corner position at the ent​rance to Hawthorn's Scotch Hill precinct, one of Melbourne's most established residential neighbourhoods.

Rather than competing with the grand homes that line Kooyongkoot Road, the architectural approach focused on restraint and longevity, using curved brickwork, generous landscaping and carefully considered proportions to integrate with the existing streetscape.

"The form feels fluid and timeless, as though shaped by the landscape itself – architecture that belongs, rather than competes," said Chris Stribley, Co-Founder and Managing Principal of Cera Stribley.

The judging submission also highlighted practical innovations throughout the building, including lift cores servicing only nine homes each, a central landscaped lightcourt designed to bring daylight and ventilation into the building, and fully enclosed private storage rooms with lighting, power and shelving to better accommodate residents transitioning from larger family homes.

[smartcode_project:default project_id=102717 project_image_fid=355293]

The Gold Award for Interior Design recognised the project's focus on long-term liveability rather than display-home aesthetics.

According to the awards submission, the interiors were designed from the inside out, prioritising how homes would function over decades of daily use through generous proportions, practical storage, durable natural materials and flexible layouts.

The specification includes natural stone throughout, upgraded acoustic glazing, V-ZUG appliances and fully enclosed storage rooms, alongside an amenity offering focused on wellness, entertainment and everyday convenience.&nbsp;

Residents will have access to a gym and yoga studio, a wellness centre featuring traditional and infrared saunas, a cold therapy shower and treatment room, as well as a residents' lounge and golf simulator/cinema room for entertainment.&nbsp;Kooyongkoot has also considered the everyday convenience of its residents by offering a private carwash and pet wash facilities on site as well as dedicated parcel lockers and oversized fully enclosed storage rooms.&nbsp;

[smartcode_project:default project_id=102717 project_image_fid=355303]

The project's attention to detail has already resonated with buyers. Earlier this year, Kooyongkoot recorded one of Boroondara's highest apartment sales when an $8 million penthouse was purchased by a Melbourne CEO downsizing from a nearby family home.

"Every detail feels deliberate, from the overall design down to the smallest touches," the purchaser said.

"The level of quality and refinement is exceptional, but what really sold it was how liveable it felt... It felt like a place where everything had been considered, not just a luxury building."

[smartcode_project:default project_id=102717 project_image_fid=355304]

Sustainability also formed a key part of both award submissions. Kooyongkoot is targeting a minimum 7.5-star NatHERS rating across all residences, supported by passive design principles, high-performance glazing, EV charging infrastructure, water reuse systems and a wellness model focused on lower-energy dry facilities rather than pools and large wet areas.

Located within walking distance of Scotch College, Methodist Ladies' College, Koo​yong Lawn Tennis Club, Aubur​n Village and Camberwell Junction, Kooyongkoot continues to target owner-occupiers looking to remain in Melbourne's inner east without compromising on space or quality. A limited selection of two, three and four-bedroom residences remains available, with prices starting from $1.9 million.

[smartcode_project_cta:default project_id=102717]

Kooyongkoot wins Gold and Silver at Better Future Melbourne Design Awards

Savills

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There has been an increase of 132% in Ryde’s property prices over the past decade, according to Savills’ latest report.
“The average price in Ryde in September 2016 was $1.5 million for a house and $656,000 for a unit.
“House prices are 40% higher than the average across Sydney, but still offer a substantial discount compared to the neighbouring waterfront suburbs of Tennyson Point and Putney, where house prices average over $2 million.
“However, units in Ryde offer a discount of 7% when compared to the Sydney average due to a higher concentration of units in central, more expensive locations.
“Over the past 10 years, house and unit prices in Ryde have increased significantly with values rising by 144% and 122% respectively, outperforming the Sydney average.
“Over the past year, the rate of annual growth has slowed to just 5%, reflecting a more subdued housing market seen across Sydney,” the report stated.
Ryde’s median house prices is $1,600,000 while units can expect to have a median price of $691,400.
A five bedroom house at <a href="https://www.realestate.com.au/property-house-nsw-ryde-124941598" target="_blank">10 Willow Crescent</a>, Ryde has been listed with a price guide of $1.75 million.
Similarly a one bedroom unit at <a href="https://www.realestate.com.au/property-apartment-nsw-ryde-125578458" target="_blank">6065/78A Belmore Street</a>, Ryde (below) has been listed for $680,000.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/31/6065_78A%20Belmore%20Street.jpg" alt="">
A strong tenant demand is driving investors to Ryde Savills says.
“Investors are attracted to Ryde for a number of reasons, including strong tenant demand.
“In Ryde, 28.1% of households are in the private rented sector, slightly higher than the average across Greater Sydney of 25.0%.
“Rental growth in Sydney and in Ryde has not kept pace with the strong capital value growth but the returns can still be attractive.
“The median weekly rent is $690 for houses and $520 for units, resulting in average yields of 2.4% and 4.1% respectively.
“Over the past 10 years, unit supply in Ryde has been inconsistent.
“A number of large-scale developments came to the market in 2014, resulting in two and half times the number of unit sales that year compared to the average over the previous five years.
“With strong price growth and rental demand, the Ryde market was able to absorb this increase in stock and the number of unit sales over the past year has decreased to be in line with the long-term average.
“The supply of new units can also affect the vacancy rate.
“In Ryde, the vacancy rate in September 2016 was 2.7%, up from 1.5% three months previous as more properties become available to rent,” Sophie Chick, Head of Savills Residential Research advised.
The population in Ryde increases by 2000 new residents annually Savills stated.
“Over the past 10 years, the population across the City of Ryde has increased by 20%, which equates to nearly 2,000 new residents per year.
“International buyers are an important source of demand for the housing market across Sydney as both owner occupiers and investors.
“In Ryde, there is already a large international community, particularly from Asia, with nearly 20% of residents describing their ancestry as Chinese compared to just 8% across Sydney.
“Residents in Ryde work in a number of locations.
“The City of Ryde, including Macquarie Park, is the most popular destination, accounting for a quarter of all workers.
“However, 75% of the workforce living in Ryde commute to elsewhere in Sydney, reflecting Ryde’s connectivity to both the centre of Sydney and other key employment locations such as Parramatta.
“The largest employment industry for people living in Ryde is the Professional, Scientific and Tech sector.
“This industry is the fastest growing in Sydney meaning Ryde is well-placed to draw on the newly created wealth that will result, as Tech buyers in particular look to emerging markets,” the report commented.
Savills says that Ryde will continue to benefit from increasing demands in Sydney’s population growth.
“The property market in Ryde has already, and will continue to, benefit from increasing demand due to Sydney's population growth.
“Over the next 20 years, the City of Ryde’s population is forecast to increase by 43% compared to 37% across Greater Sydney.
“As well as the new residential units under construction, a number of new office, retail and infrastructure projects are underway which will continue to increase the desirability of the area for existing and new residents,” the report stated.
 
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j.ballantyne1990-6AQqhLzZaK

Property prices on the rise in Ryde: Savills

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The UK commercial property investment markets were already past their peak in both pricing and volume terms a year ago, and the result on the referendum on EU membership has arguably done little to change the trend, according to Savills’ latest report.
Confidence was definitely rocked in the third quarter of 2016, but by the end of last year there was acceptance that Brexit is a long process, rather than a one-hit event.
What has changed since the referendum is the make-up of investors that are active in the UK, with less activity by institutions and a sharp rise in demand from overseas private investors.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.03.04%20pm.jpg" target="_blank">Click to enlarge</a>
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Many investors have been attracted by the weakening of the pound, and at present this is seen as enough to compensate for a perceived increase in occupational risk.
Overall, our predictions for 2017 and beyond are investment volumes are expected to trend downwards towards £50 billion per annum, with a swing away from opportunistic deals to income-security plays.
Yields are expected to rise in most sectors, though the stable debt market, low vacancy rates, and global investor demand is expected to put a lower ceiling on prime yields than was reached during the GFC.
Brexit definitely carries a risk of creating a sustained period of occupier uncertainty, but to some degree this should be balanced by lower levels of development activity.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.03.12%20pm.jpg" target="_blank">Click to enlarge</a>
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However, until some clarity emerges as to how Britain will exit from the EU, the real impact on the UK market will be hard to quantify.
“We expect investment volume in Continental Europe in 2017 to be similar to that of 2016,” the report stated.
Although interest rates are expected to rise to 1.16% in the Eurozone, the property market should remain high on investors’ radar.
“In France, Germany and the Netherlands, where elections will be held, we expect a wait and see attitude by some investors during the first half of the year,” the report stated.
However, the prevailing story regarding core countries is the lack of prime product.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.03.21%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.03.21%20pm.jpg" alt="">
At the other end of the spectrum, prime yields in non-core countries are still above the European average, offering more attractive returns and yield compression potential.
This is especially so in countries like Spain and Italy where strong property fundamentals combined with the availability of portfolio opportunities are attracting foreign investors.
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Little change in the United Kingdom commercial property market despite Brexit: Savills

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Leased space to the education sector in Melbourne's CBD in 2016 rose 200 percent on the previous year with increases in land taxes hitting stock levels, putting upward pressure on rents, according to real estate firm Savills.
The trend is likely to continue in 2017, according to education sector specialist and Savills director Mathew Kent. 
Savills is currently dealing with more than 15 leasing requirements for in excess of 60,000 sqm.
Some of the educators in the market include Monash University (40,000sqm), Think Education (2000sqm), Baxter (3000sqm), and RMIT (10,000sqm).
The total 39,840 square metres leased (deals over 500sqm) in 2016 included 14,222 square metres of prime space as institutions, including the top universities, were forced, in some cases, to take higher grade accommodation in a market limited by the availability of education specific space.
Kent said withdrawal of secondary buildings for residential conversion, a lack of 9B accredited buildings, fit-out costs, and competitors in the same building, were all issues which worked to limit the amount of space available to educators.
"For these reasons the availability of suitable accommodation to meet the demand from education users in Melbourne is now at levels where landlords have been able to demand higher rental and more attractive terms for suitable accommodation,’’ Kent said.
He said the increasing demand for limited space had seen rents rise from a range of $300 sqm to $350 sqm, to $550 sqm plus over the last five years with a corresponding fall in incentives.
Kent said the significant hike in land tax had also had been important in reducing available space.
"The doubling of land tax in low rise buildings may render the current use of a building, in terms of its tenancy profile and rental returns, unviable for some landlords and that has forced them, in some cases, to sell to residential developers,’’ Kent said.
 
<table border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td colspan="4" valign="top" width="475">
Select Central Melbourne Education Leases to December 2016
</td>
</tr>
<tr>
<td valign="top" width="50">
Date
</td>
<td valign="top" width="160">
Property
</td>
<td valign="top" width="79">
NLA (sq m)
</td>
<td valign="top" width="185">
Tenant
</td>
</tr>
<tr>
<td valign="top" width="50">
Mar-16
</td>
<td valign="top" width="160">
277 William St
</td>
<td valign="top" width="79">
960
</td>
<td valign="top" width="185">
Danford College
</td>
</tr>
<tr>
<td valign="top" width="50">
Jul-16
</td>
<td valign="top" width="160">
553 St Kilda Rd
</td>
<td valign="top" width="79">
8,052
</td>
<td valign="top" width="185">
Monash University
</td>
</tr>
<tr>
<td valign="top" width="50">
Aug-16
</td>
<td valign="top" width="160">
399 Lonsdale St
</td>
<td valign="top" width="79">
892
</td>
<td valign="top" width="185">
Chisholm Institute
</td>
</tr>
<tr>
<td valign="top" width="50">
Aug-16
</td>
<td valign="top" width="160">
700 Collins St
</td>
<td valign="top" width="79">
2,682
</td>
<td valign="top" width="185">
Open Universities
</td>
</tr>
<tr>
<td valign="top" width="50">
Aug-16
</td>
<td valign="top" width="160">
168 Exhibition St
</td>
<td valign="top" width="79">
3,772
</td>
<td valign="top" width="185">
Acknowledge Education
</td>
</tr>
<tr>
<td valign="top" width="50">
Sep-16
</td>
<td valign="top" width="160">
727 Collins St
</td>
<td valign="top" width="79">
4,500
</td>
<td valign="top" width="185">
Deakin University
</td>
</tr>
<tr>
<td valign="top" width="50">
Sep-16
</td>
<td valign="top" width="160">
360 Collins St
</td>
<td valign="top" width="79">
4,000*
</td>
<td valign="top" width="185">
La Trobe University
</td>
</tr>
<tr>
<td valign="top" width="50">
Sep-16
</td>
<td valign="top" width="160">
247 Collins St
</td>
<td valign="top" width="79">
1,664
</td>
<td valign="top" width="185">
Discover English
</td>
</tr>
<tr>
<td valign="top" width="50">
Nov-16
</td>
<td valign="top" width="160">
376 Bourke St
</td>
<td valign="top" width="79">
943
</td>
<td valign="top" width="185">
Brighton Institute of Technology
</td>
</tr>
<tr>
<td colspan="4" valign="top" width="475">
Source: Savills Research                                                   *Expansion on multiple floors
</td>
</tr>
</tbody></table>
In the most recent deals Melbourne University has taken 6500sqm at 333 Exhibition St, Cambridge (7200sqm at 108 Lonsdale Street), and Charles Sturt University (3000sqm at 601 Bourke Street).
Survey author, Savills’ Associate Director Research &amp; Consultancy, Monica Mondkar, said the education sector accounted for nearly 21 per cent of the 191,484 square metres of office space leased by the Government &amp; Community sector in 2016.
Ms Mondkar said the latest Department of Education figures revealed there were 554,179 full-fee paying international students in Australia on a student visa in 2016 representing a 10.9 per cent increase on 2015 with new enrolments in Victoria up by 12 per cent.
The average annual enrolments growth rate has been 6.5 per cent per year over the last ten years.
She said the Victorian Governments’ $31.9 million investment over four years in the international education sector announced in the 2016/2017 budget would likely underpin further rises in student numbers.
"Student numbers have been increasing year on year and, as Australia’s third biggest export at circa $20 billion, there is little doubt the Melbourne CBD education market will continue to grow and that is reflected in student choice with Melbourne’s international student population at more than 30,000*,’’ Ms Mondkar said.
According to the QS Best Student Cities 2016 index – a ranking of the world’s leading urban destinations for international students by university ranking, affordability, student mix, desirability, and employer activity – Melbourne ranked second behind Paris with Tokyo third followed by Sydney in fourth place.
QS Best Student Cities 2016 
<table style="width: 214px; height: 192px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" width="170">
Ranking
</td>
<td valign="top" width="163">
City
</td>
</tr>
<tr>
<td valign="top" width="170">
1
</td>
<td valign="top" width="163">
Paris
</td>
</tr>
<tr>
<td valign="top" width="170">
2
</td>
<td valign="top" width="163">
Melbourne
</td>
</tr>
<tr>
<td valign="top" width="170">
3
</td>
<td valign="top" width="163">
Tokyo
</td>
</tr>
<tr>
<td valign="top" width="170">
4
</td>
<td valign="top" width="163">
Sydney
</td>
</tr>
<tr>
<td valign="top" width="170">
5
</td>
<td valign="top" width="163">
London
</td>
</tr>
<tr>
<td valign="top" width="170">
6
</td>
<td valign="top" width="163">
Singapore
</td>
</tr>
<tr>
<td valign="top" width="170">
7
</td>
<td valign="top" width="163">
Montreal
</td>
</tr>
<tr>
<td valign="top" width="170">
8
</td>
<td valign="top" width="163">
Hong Kong
</td>
</tr>
<tr>
<td valign="top" width="170">
9
</td>
<td valign="top" width="163">
Berlin
</td>
</tr>
<tr>
<td valign="top" width="170">
10
</td>
<td valign="top" width="163">
Seoul
</td>
</tr>
</tbody></table>
</body></html>

Education leasing up 200 percent on previous 12 months: Savills

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The iconic Australian Exchange Centre, home of the ASX, is soon to hit the market with price expectations of more than $325 million. 
The listing of the building at 20 Bridge Street in the heart of Sydney’s financial district makes it the first institutional grade Sydney CBD core offering since June 2013. 
The Malaysian pension fund Kumpulan Wang Persaraan is selling the Exchange Centre.
The A-grade 20,329 sqm commercial building comprises 13 upper levels of office accommodation, ‘Exchange Square’ retail on the ground level and an auditorium at basement level.
The building is 96 per cent leased with a long Weighted Average Lease Expiry (WALE) of more than seven years and managed by Investa.
It last exchanged hands for $185 million in 2011, being snapped up by an offshore institutional investor, according to RP Data.  
The ASX Group occupies more than 45 per cent of the building, with a lease expiry of more than 11 years.
The listing agents are Simon Fenn, Ian Hetherington and Ben Azar of Savills.
The high profile asset is only one of six buildings valued at over circa $200 million and which is 100 per cent owned within the CBD core.
“This is a rare opportunity to purchase 100 per cent interest in the Sydney core and we expect a strong mix of both local and offshore interest, likely to come from China, Hong Kong, Singapore, Japan and parts of Europe,” said Simon Fenn, managing director NSW at Savills. 
The Exchange Centre is minutes from Circular Quay and Wynyard Train Station. 
 
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prateek24-ezbwHMbNAk

Sydney’s coveted Exchange Centre lists through Savills with price hopes of more than $325 million

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Melbourne is the top ranked ‘tech city’ in Australia and 14th in the world offering the infrastructure, business environment, talent pool and lifestyle to make it a strong base for tech companies, according to new research from London based international real estate advisor Savills.
And according to Victoria’s Minister for Small Business, Innovation and Trade, Philip Dalidakis, that is no surprise given the Government’s policy of taking "brand Victoria to the world’’.
While US cities dominated the top of the Tech Cities rankings – Austin (Texas) came in at number one followed by San Francisco, New York, and London, according to the Tech Cities 2017 report - the liveability of cities including Melbourne, Amsterdam, Copenhagen and Toronto, placed them above more established global tech rivals.
Savills National Head of Research in Australia, Tony Crabb, said the elevation of `liveable’ cities in the rankings centred on their strong performance in terms of ‘buzz and wellness’, factors that were likely to prove increasingly important to the tech industry in decisions on where to locate and on attracting future talent. Melbourne was ranked 8th on this index.
"Everybody here knows Melbourne’s reputation as the world’s most liveable city, a title it has taken for six consecutive years, and so it is not surprising to see how well Melbourne ranked on this metric.
That single factor may well prove, more than any other, the most critical factor in further establishing and maintaining Melbourne‘s pre-eminence in what is increasingly one of the most important employment and growth industries in the country,’’ Mr Crabb said.
Savills Tech Cities 2017 Buzz and Wellness Index 
<a href="https://www.propertyobserver.com.au/images/2017/03/07/Chart-1.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/07/Chart-1.jpg" alt="">
The UK report quantified ‘buzz’ (nightlife, entertainment, culture) and ‘wellness’ (pollution levels, quality of parks, healthcare, commuting times) and the cost of living in each location to create a specific ‘city buzz and wellness index’.
It noted that given the increased focus on physical and mental wellbeing among the latest generation of workers, it could come to dominate their decision-making.
According to Nicky Wightman, Director Savills Worldwide Occupier Services, providing an environment which enables tech companies and start-ups to plug straight into the infrastructure and funding they need to be a success is an important part of any tech city.
"However this alone won’t necessarily make them attractive destinations. Young tech talent increasingly want to live in dynamic, healthy neighbourhoods within walking or cycling distance of the office.
Cities that deliver those environments are therefore likely to consolidate their positions as destinations for tech talent and occupiers who want to attract the best staff,’’ Ms Wightman said.
The report’s release follows the Victorian Government’s recent announcement that Texas-based software firm, AgileCraft, would open its Asia-Pacific headquarters in Melbourne.
Savills Tech Cities 2017 overall rankings:
<a href="https://www.propertyobserver.com.au/images/2017/03/07/Chart%202.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/07/Chart%202.jpg" alt="">
Mr Dalidakis, said AgileCraft was yet another example of a leading global tech company choosing Victoria as an entry point for the Asia-Pacific market.
"Over the past two years we have taken brand Victoria to the world, attracting more and more leading global companies to invest in the state’s booming tech sector,’’ Mr Dalidakis said.
AgileCraft Chief Executive Officer Steve Elliott said Melbourne’s emerging tech sector and close proximity to Asia made it a perfect location to set up its regional headquarters and expand throughout the Asia Pacific region.
“We consider ourselves to be an innovative company at AgileCraft and the Victorian Government made it clear to us that it is trying to attract innovative businesses to the state, so we look forward to being a part of the Victorian technology ecosystem,” Mr Elliot said.
</body></html>

Melbourne ranks as top ‘tech city’ in Australia

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In a world racked by political uncertainty induced by Brexit negotiations, European elections and a new presidency in the US, the Asian markets appear to have maintained their appeal in 2016, according to Savills’ latest report.
"Office yields across all major cities hardened over the second half of last year and we believe there is still some (limited) scope for them to fall further in 1H/2017; the low interest rate environment, the ongoing ‘search for yield’ and increasing allocations to real estate are all considered to be positives for the sector," the report stated.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%205.21.11%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/21/Screen%20Shot%202017-02-21%20at%205.21.11%20pm.jpg" alt="">
One of the most significant challenges for investors is a lack of prime office stock, however, and volumes have fallen consistently compared with 2015, a situation which is unlikely to reverse any time soon.
This lack of liquidity across most asset classes has arguably been masked by the above average number of portfolio deals recorded over the second half.
Scarcity of assets has resulted in money accumulating on the sidelines, causing fundraising to decline versus the previous year.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%205.21.22%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/21/Screen%20Shot%202017-02-21%20at%205.21.22%20pm.jpg" alt="">
Despite its inward focus, Asian real estate capital has continued to explore overseas markets with the US attracting the lion’s share of deals, followed by the UK.
Cross border activity in 2016 was dominated by China, South Korea, Singapore and Hong Kong in that order while South Korean activity registered the highest rate of increase.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%205.21.37%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/21/Screen%20Shot%202017-02-21%20at%205.21.37%20pm.jpg" alt="">
It will be interesting to see how Asian capital reacts to rate hikes  by the Federal Reserve and a strengthening US dollar set against a less predictable policy landscape in 2017 if that  is what comes to pass.
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Asian commercial property markets continue to maintain their appeal despite uncertainty: Savills

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The last 12 months has brought a dose of healthy moderation to the US economy, according to Savills’ latest report.
Investors and lenders forced a recalibration of high-flying tech firms and oil and gas prices found a floor.
There seems to be some convergence in residential and commercial property markets as well – pricing in luxury markets is levelling off.
In comparison to the volatility in equity markets, real estate in the US held up very well. Office property sales in the US totalled $124 billion through November of this year, roughly 4 percent below the $129.6 billion in the first 11 months of 2015.
This slight decline comes as no surprise.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.35.49%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.35.49%20pm.jpg" alt="">
Many of the trophy assets in gateway markets such as Manhattan and Chicago changed hands in 2014 and 2015, the novelty of the industrial sector has worn off, and there simply are not as many institutional- grade or conversion opportunities in secondary or tertiary markets to keep pace with the gateway markets.
Unlike the fundamentals underlying retail sales and office markets this is not a demand deficiency – it is a supply shortage.
In this sense investment sales are performing a bit like labour markets – investors and top employers have been turning over every stone in every market.
So far, most investors seem to be maintaining appropriate selectivity.
Many are following the demographic upside to Sunbelt markets such as the Carolinas as well as Mountain West markets including Salt Lake City and Las Vegas.
Steady population and job growth and controlled construction activity in these markets leaves some room for NOI growth in the next couple of years.
Europe has seen a similar phenomenon - volume is up significantly in the Netherlands, Spain and Sweden but there are only so many investment grade assets in these markets.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.36.00%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.36.00%20pm.jpg" alt="">
The “most-favoured market” status of some gateways is slipping slightly.
Most buyers are showing disdain for gateway markets such as Manhattan and Washington DC, where demand is running short of growing supply.
On the other hand, they have remained active in Boston and Los Angeles, where the life science and entertainment/social media sectors continue to grow.
Boston’s market fundamentals are in fact among the strongest in country and appear as though they have more to run than San Francisco, which has seen a recent spike in sublet supply and drop-off in leasing.
Similarly, Los Angeles has seen its strongest leasing volume in a decade.
Office property sales have surged more than 75 percent during 2016 from 2015 levels.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.36.11%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.36.11%20pm.jpg" alt="">
Finally, buyers are acknowledging that some of the traditionally “low barrier to entry” markets that were always seen as a risk due to chronic overbuilding may have matured in this cycle.
Atlanta and Dallas/Fort Worth stand out as markets that are reaping the rewards of a controlled development pipeline.
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United States real estate markets hold up well: Savills

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The calendar year 2016 marked another year of strong performance in property investment markets, according to Savills’ latest report.
In Australia, Savills recorded approximately $27 billion worth of commercial property transactions in the  12 months to December 2016, down from $33.74 billion in the previous year, but much the same as the five year average ($25.6 billion).
A lack of portfolios and a diminishing supply of prime properties for sale continues to weigh on investment volumes.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.16.16%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.16.16%20pm.jpg" alt="">
Foreign investors were the most active in the investment market in 2016, purchasing 40 percent of stock reported sold or approximately $10.7 billion.
Professional investors, represented by Trusts, Funds and Syndicates, purchased a total of $8.75 billion of commercial property.
Both buyer groups remain keenly interested with ongoing appetite for commercial property investment.
A slowdown in resource demand from China, a reversal of commodity prices and the end of the mining investment boom (coupled with the GFC) saw interest rates in Australia fall to historic lows.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.16.26%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.16.26%20pm.jpg" alt="">
A subsequent pickup in occupier and investment demand in Melbourne and Sydney followed whilst there was a substantial reversal in fortunes in Brisbane and Perth. Whilst Brisbane has stabilised,
Perth continues to be challenged (more office supply is in the pipeline), Melbourne is meeting both occupier and investment demand with a supply response whilst Sydney remains challenged on the supply front.
An added difficulty in both Melbourne and Sydney is the continual withdrawal of office space and development sites (both in CBD and non-CBD office markets) for conversion to residential or compulsory acquisition for public works.
<a href="https://www.propertyobserver.com.au/images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.16.37%20pm.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/21/Screen%20Shot%202017-02-21%20at%207.16.37%20pm.jpg" alt="">
Capital markets exhibited greater degrees of volatility throughout 2016 and have finished the year stronger with the ASX200 rising 9 percent over the last six months, the Australian dollar ended up largely unchanged against the US dollar and 10 year bonds yields softened by 90 basis points to approximately 2.9%.
Commercial property investment yields continued to firm across the board (by an average 20 basis points) – a theme we have been writing about for several years now.
Whilst the “bond yield” story has run its course, in some markets, fundamentals are improving rapidly.
“We believe this improvement will lead to further tightening in yields as investment capital starts to price in expectations of future NOI growth. This part of the yield cycle is just beginning,” the report stated.
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Strong performance in the Australian 2016 commercial property market: Savills

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Veteran agent Philip Waller has departed McGrath Estate Agents for a third time.
He has joined Savills Luxury Property in Double Bay, but overseeing its upper North Shore offerings.
He has achieved some of the North Shore’s most important landmark sales in the prestigious $5 million plus bracket.
His bio advised in the financial year, he again sold more properties for over $5 million than any other Upper North Shore agent.
Waller was at McGrath since 2011.
He was previously there from 2001 to 2006 when he joined the Knight Frank luxury team which was ill-fated.
He was also briefly at McGrath around 1997 when it had its offices in Juniper Hall.
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jchancellor-FAypfDUnLy

Philip Waller departs McGrath for Savills Luxury

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Sydney leads top global cities in office yields, which continue to firm as investors seek safe havens for their funds amidst economic and political uncertainties which look to prevail for some time, according to real estate firm Savills.
The latest World Office Yield Spectrum report by Savills and Australia’s Deakin University found yields across 11 gateway cities had firmed by an average 95 basis points since December 2014, with San Francisco witnessing a dramatic 32 per cent fall from nearly 7 percent to 4.64 percent.
Of the gateway cities, Sydney led the pack offering by far the most attractive yields at 5.37 percent, with LA West and San Francisco the only others offering above 4.50 percent.
Shanghai and LA West recorded falls of just 0.29 and 0.31 percent respectively.
The data from 54 cities across Asia, Europe, the US and Australia, put Hanoi on top with a prime yield of 8.75 percent followed by Ho Chi Minh City at 8.5 percent.
Taipei brought up the rear with the tightest yield of just under 2 percent, while Hong Kong was at 2.5 percent.
Report editor Tony Crabb, Savills national head of Research in Australia, said overall office markets looked set for another year of strong investment.
It will be driven by office property’s most preferred investment status along with economic and political factors which had pushed investors towards the safety of bricks and mortar.
"This is an interesting time in the investment cycle where markets have responded to the inflation/growth trade by pushing bond yields and growth stocks, whilst also recognising office markets should perform well as demand grows’’ Crabb said.
He said with some level of economic and political uncertainty remaining in most markets it was fair to say that office risk premiums would continue to offer very good value and hence drive demand and, in some instances, even firmer office investment yields.
"Much of what happens in 2017 and beyond will depend on the course the US Federal Reserve takes with regards to interest rates and the new President’s policy settings.
Those factors, along with Brexit negotiations and elections in key European countries, will largely determine how currencies behave, how trade flows and how capital moves around the world,’’ Crabb said.
He said if anything would limit office property investment it was the shortage of stock in most gateway markets which had experienced, in some instances, record investment levels in recent years.
"That shortage of stock is being exacerbated by the strength of leasing markets, especially in gateway cities, which is driving tighter vacancy and rental growth, and landlords are happily holding on for the ride,’’ Crabb said.
 World Office Yields: Gateway Cities – 2014 - 2016
<table border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td style="text-align: center;" valign="top" width="129">
 
</td>
<td style="text-align: center;" valign="top" width="129">
December 2016 %
</td>
<td style="text-align: center;" valign="top" width="129">
December 2014 %
</td>
<td style="text-align: center;" valign="top" width="129">
Change %
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
Sydney
</td>
<td style="text-align: center;" valign="top" width="129">
5.37
</td>
<td style="text-align: center;" valign="top" width="129">
6.62
</td>
<td style="text-align: center;" valign="top" width="129">
- 1.25
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
LA West
</td>
<td style="text-align: center;" valign="top" width="129">
5.03
</td>
<td style="text-align: center;" valign="top" width="129">
5.34
</td>
<td style="text-align: center;" valign="top" width="129">
- 0.31
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
San Francisco
</td>
<td style="text-align: center;" valign="top" width="129">
4.64
</td>
<td style="text-align: center;" valign="top" width="129">
6.97
</td>
<td style="text-align: center;" valign="top" width="129">
- 2.33
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
Shanghai
</td>
<td style="text-align: center;" valign="top" width="129">
4.42
</td>
<td style="text-align: center;" valign="top" width="129">
4.71
</td>
<td style="text-align: center;" valign="top" width="129">
- 0.29
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
New York
</td>
<td style="text-align: center;" valign="top" width="129">
4.09
</td>
<td style="text-align: center;" valign="top" width="129">
5.04
</td>
<td style="text-align: center;" valign="top" width="129">
- 0.95
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
Singapore
</td>
<td style="text-align: center;" valign="top" width="129">
3.97
</td>
<td style="text-align: center;" valign="top" width="129">
5.29
</td>
<td style="text-align: center;" valign="top" width="129">
- 1.32
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
London
</td>
<td style="text-align: center;" valign="top" width="129">
3.88
</td>
<td style="text-align: center;" valign="top" width="129">
4.38
</td>
<td style="text-align: center;" valign="top" width="129">
- 0.50
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
Munich
</td>
<td style="text-align: center;" valign="top" width="129">
3.40
</td>
<td style="text-align: center;" valign="top" width="129">
4.25
</td>
<td style="text-align: center;" valign="top" width="129">
- 0.85
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
Tokyo
</td>
<td style="text-align: center;" valign="top" width="129">
3.20
</td>
<td style="text-align: center;" valign="top" width="129">
3.95
</td>
<td style="text-align: center;" valign="top" width="129">
- 0.75
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
Paris
</td>
<td style="text-align: center;" valign="top" width="129">
3.18
</td>
<td style="text-align: center;" valign="top" width="129">
4.52
</td>
<td style="text-align: center;" valign="top" width="129">
- 1.34
</td>
</tr>
<tr>
<td style="text-align: center;" valign="top" width="129">
Hong Kong
</td>
<td style="text-align: center;" valign="top" width="129">
2.53
</td>
<td style="text-align: center;" valign="top" width="129">
3.11
</td>
<td style="text-align: center;" valign="top" width="129">
- 0.58
</td>
</tr>
</tbody></table>
Source: Savills Research
Australia/New Zealand
The $27 billion worth of commercial property transactions recorded in Australia in 2016 remained above the five-year average for the fourth year running, Crabb said.
Meanwhile, the market was on track to record a fifth consecutive year of growth, a lack of portfolios and a diminishing supply of prime properties would limit investment volumes.
Foreign investors were the most active in 2016, purchasing 40 percent of stock reported sold - approximately $10.7 billion - while professional investors.
It is represented by trusts, funds and syndicates, spent $8.75 billion.
Crabb said while both buyer groups remained keenly interested in ongoing investment, yields would continue to firm.
"In some markets, particularly Sydney and Melbourne, market fundamentals are improving rapidly. "We believe this improvement will lead to further tightening in yields as investment capital starts to price in expectations of future NOI growth. This part of the yield cycle is just beginning,’’ he said.
<a href="https://www.propertyobserver.com.au/images/2017/02/14/Savills-1.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/14/Savills-1.jpg" alt="">
Asia
In Hong Kong, Savills’ senior director, Research and Consultancy, Simon Smith, said yields across Asian investment markets had firmed but there was still some limited scope for further falls.
"The low interest rate environment, the ongoing search for yield and increasing allocations to real estate are all considered to be positives for the sector.
One of the most significant challenges for investors is a lack of prime office stock and volumes have fallen consistently compared with 2015.
This is a situation which is unlikely to reverse any time soon,’’ Smith said.
He said the lack of liquidity across most asset classes had arguably been masked by the above average number of portfolio deals recorded over the second half.
"Scarcity of assets has resulted in money accumulating on the side-lines causing fundraising to decline versus the previous year,’’ Smith said.
He said despite its inward focus Asian real estate capital had continued to explore overseas markets with the US attracting the lion’s share of deals.
Cross border activity had been dominated by China, South Korea, Singapore and Hong Kong in that order while South Korean activity registered the highest rate of increase.
UK/Europe
Savills director, Research Europe, Lydia Brissy, said Brexit had seen a decline in institutional investment activity but a sharp rise in demand from off-shore private investors.
Many investors, she said, had been attracted by the weakening of the pound which was seen as enough to compensate for a perceived increase in occupational risk.
"Overall, our predictions for 2017 and beyond are investment volumes are expected to trend downwards towards £50 billion per annum, with a swing away from opportunistic deals to income-security plays.
Yields are expected to rise in most sectors, though the stable debt market, low vacancy rates, and global investor demand is expected to put a lower ceiling on prime yields than was reached during the GFC.
Brexit definitely carries a risk of creating a sustained period of occupier uncertainty, but to some degree this should be balanced by lower levels of development activity.
However, until some clarity emerges as to how Britain will exit from the EU, the real impact on the UK market will be hard to quantify,’’ Brissy said.
She said the expectation was that investment volumes in Continental Europe in 2017 would be similar to 2016.
"Although interest rates are expected to rise to 1.16% in the Eurozone, the property market should remain high on investors’ radar.
In France, Germany and the Netherlands where elections will be held, we expect a wait and see attitude, however the prevailing story regarding core countries is the lack of prime product."
She said prime yields in non-core countries remained above the European average, offering more attractive returns and yield compression potential.
"This is especially so in countries like Spain and Italy where strong property fundamentals combined with the availability of portfolio opportunities are attracting foreign investors.’’
USA
In New York, director of US Real Estate Analytics at Savills-Studley, Keith DeCoster, said in comparison to the volatility in equity markets, real estate in the United States held up very well in 2016 with office property sales totalling $124 billion to November, roughly 4 percent below the $129.6 billion in the first 11 months of 2015.
"The 'most-favoured market' status of some gateways is slipping slightly with most buyers showing disdain for markets such as Manhattan and Washington DC, where demand is running short of growing supply," DeCoster said.
"On the other hand, they have remained active in Boston and Los Angeles, where the life science and entertainment/social media sectors continue to grow."
He said Boston’s market fundamentals were among the strongest in the country and appeared as though they had more to run than San Francisco.
It had seen a recent spike in sublet supply and drop off in leasing, while Los Angeles has seen its strongest leasing volume in a decade.
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